Kazakh brokers bought Russian OFZs for $1.4 billion

Brokerage companies in Kazakhstan, which began actively buying up Russian government bonds at the end of the summer, do so mainly on behalf of Kazakh and Russian clients. According to the Agency of the Republic of Kazakhstan for the regulation and development of the financial market, from March to December 1, 2022, OFZ transactions amounted to 641.1 billion tenge ($1.4 billion).

The agency did not provide data for 2021 for comparison, Bloomberg reports, but in December Bloomberg wrote that financial companies in Kazakhstan began to actively buy Russian Eurobonds and OFZ. They are registered with the Central Securities Depository of Kazakhstan, after which the new owners, according to Bloomberg sources, can receive payments on coupons and to repay the principal debt.

According to the depositary, in eight months, from March to October 2022, the value of registered securities increased 100 times to almost $800 million (at the exchange rate at that time). If before March there were only three issues of Eurobonds and OFZ issued by the Ministry of Finance of Russia, then by November 1 – already 42. The sharpest jump was observed in September – from 13 to 33.

Before that, in August, the Bank of Russia allowed the sale of bonds to representatives of “friendly” countries; prior to this, the securities of foreign investors were blocked, and all payments on them are credited to special type C accounts, from which they cannot be withdrawn. Because of this, the share of foreigners from the beginning of the war in Ukraine remained at a level of a little less than 18% – until October.

However, in November, according to the Bank of Russia, it fell to 13%.

About half of OFZ transactions were carried out by six Kazakh brokers at the expense of clients, the Agency for Regulation and Development of the Financial Market reported. Of these funds, 48.7% are accounted for by Kazakhstani clients, and 41.4% – by Russian ones. Other buyers, according to the agency, are residents of the UAE and Slovakia.

Now, according to the Moscow Exchange, 10-year OFZs are quoted at 100% of their face value. In February-March, they fell below 90% on the Moscow Exchange, although on the international market, after Western sanctions and Russian blocking, they are much lower. In August, some Western banks, including Barclays and Jefferies, carried out OFZ transactions for clients at 20-25% of the face value.

Kazakhstan for operations with OFZ can be used, among other things, by Russians who have left. According to the Bank of Russia, in the third quarter, transfers to foreign banks amounted to 1.47 trillion rubles. (in the III quarter of 2021 – 0.057 trillion rubles).

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